Chapter 3: Setting The Price You
Want To Pay
This chapter shows how to research vehicle prices and costs
to determine the price that should be paid before ever entering
a dealership. Whether buying or leasing, the common denominator
is the dealer's invoice price and desire to maximize the
profit margin. This information is publicly available through
the sources like the Internet and through specialized publications
to those who take the effort to find it. Researching a vehicle
for this information, for the invoice costs of option packages
and for the special details that can enhance a dealer's
profit margin, can strengthen a consumer's negotiating position.
In short, information is the key to the good deal that
we all want and this chapter discusses the information needed
and why. A selection of valuable information sources is
to a good Total Cost
- Take the dealer's invoice price*
- Add the dealers invoice cost of any desired options*
- Deduct at least 50% of any dealer incentive*
The total after these 3 steps is your opening bid.
*Note: These three plus the holdback are the real
sources of profit for the dealer in a sale and, as such,
are the only real negotiable components. Don't allow extra
things into the negotiation, like sales tax, to fudge
the numbers. Let the salesperson know that you know what
you are talking about, that you are basing your bid on
the three considerations listed above and that the extras
will be factored-in afterwards.
- Deduct any customer rebate
- Add applicable taxes
- Add the Freight Charge
- Add the dealer advertising fee
The total after these 7 steps is your Total Cost.
the Dealer's Cost
- Be informed to have the power to get a better
- With all the resources out there, vehicle consumers
can be better informed than ever before and can know
more than just the Manufacturers Suggested Retail
- Price lists and guides can be found online and
on paper that will tell you the wholesale price of
a vehicle so that you know what the dealer's cost
is before you even walk into the showroom.
- Look for other price factors; information about
special offers like subsidized leasing, rebates and
other manufacturer's deals can provide ammunition
for your negotiation.
- Remember the holdback
- The auto manufacturer's invoice price does not tell
the whole story. A holdback is a quarterly payment
(approximately 3% of MRSP) paid to dealers that reduces
their cost below the listed invoice price.
- The holdback will always factor in the dealer's
profit expectation. A selling price of 1% below the
listed invoice price (apparently selling at a loss)
may still mean 2% profit for the dealer from the holdback
Note: A dealer is unlikely to sell below the invoice
price without some manufacturer's incentive to sweeten
TIP: When dealers compete for your business -
Compare dealer prices from multiple discount dealers
in your area using Edmunds.
With multiple price quotes you'll be able to get
the best deal on the vehicle you want.
It's the fast, easy and headache free way